CMS Manufacturing Cost Analysis 2

Question 1

Which costing method assigns overhead costs to products based on the activities that drive those costs?

Accepted Answer

Activity-based costing (ABC)

Answer

Activity-based costing (ABC) identifies cost drivers and assigns overhead based on actual activity consumption rather than broad allocation bases.

Question 2

A product's selling price is $150 and its total variable cost is $90. What is the contribution margin ratio?

Accepted Answer

40%

Answer

Contribution margin ratio = (Selling price − Variable cost) / Selling price = ($150 − $90) / $150 = 40%.

Question 3

In target costing, the allowable cost is determined by:

Accepted Answer

Subtracting the desired profit from the market price

Answer

Target costing sets allowable cost as Market Price − Desired Profit Margin, pushing design and production teams to meet that cost.

Question 4

Which variance measures the difference between actual hours worked and standard hours allowed, multiplied by the standard labor rate?

Accepted Answer

Labor efficiency variance

Answer

Labor efficiency variance = (Actual hours − Standard hours allowed) × Standard rate, indicating how efficiently labor was used.

Question 5

Which of the following best describes a 'sunk cost' in manufacturing decision-making?

Accepted Answer

A past expenditure that cannot be recovered regardless of future decisions

Answer

Sunk costs are historical expenditures already incurred and irrecoverable, so they should be excluded from future decisions.

(CMS) Certified Manufacturing Specialist Practice Test